Menomonee Falls-based printing company
Arandell Holdings Inc. has filed for Chapter 11 bankruptcy and is closing its Kentucky printing plant.
The company says it has enough liquidity to continue operations at its Wisconsin facility.
“Given fundamental changes in the industry resulting from COVID-19 and other factors, Company management is taking proactive and aggressive steps to improve the organization’s overall business framework, while continuing to pursue new business opportunities,” said Brad Hoffman, chairman, president and chief executive officer of Arandell.
Existing lenders have committed $31.5 million in debtor-in-possession financing and Arandell is engaged in “constructive discussions regarding strategic alternatives and the terms of a potential financial restructuring plan.”
“We’re continuing business operations as usual. Customers will receive the same level of high-quality products and services they are accustomed to,” Hoffman said. “Our leadership team is continuing to evaluate the best path to creating a more sustainable capital structure for Arandell.”
Hoffman led a
management buyout of the company in 2014. He owns 100% of the company’s voting shares and around 73% of its total equity.
Arandell is the third largest printer of catalogs in the U.S. and counts blue chip retailers and brands among its customers. The company ended 2019 with more than 600 employees but has since reduced its staff to around 500. It pays an average of nearly $1.9 million in gross wages each month.
Like many in the printing industry, Arandell has been challenged by store closings brought on by the growing popularity of e-commerce. Those issues were only exacerbated by COVID-19, which brought additional closures and bankruptcies and prompted some customers to push out their payments.
The drop in business from the pandemic prompted the decision to close the company's , Kentucky facility, which
Arandell acquired in early 2018. The plant had seen a series of challenges following the acquisition and did not deliver positive EBITDA until the end of 2019.
The facility had been abandoned by its prior owners and sat idle for six months. After announcing the acquisition in March 2018, Arandell was not able to begin production until September of that year. Once production began, the company experienced mechanical and electrical issues with equipment and operating failures of the air and water systems that required emergency repairs.
A November 2018 ice storm in northern Kentucky also caused loss of power and a power surge that took several days to correct.
Arandell also had to rely more on temporary employees than it had originally planned.
The company’s Kentucky subsidiary ended 2018 with an EBITDA loss of $2.7 million. The poor performance continued in 2019 with a $565,000 loss in the first quarter and a $300,000 loss in the second. The subsidiary broke even in the third quarter and posted its first positive EBITDA in the fourth quarter of 2019.
Arandell Corp., the company’s Wisconsin operation, also faced “an unusually greater than normal insurance ‘high claim’ year with several major medical cases, which contributed to a drop in EBITDA from $9.5 million in 2017 to $5.9 million in 2018.
Arandell was also impacted by a $1.4 million decline from expectations in paper scrap proceeds, $1.25 million in uncollected receivables because of customer bankruptcies, a $500,000 loss on paper margins because of working capital challenges, a 20% increase in paper prices and a 5% increase in postal rates since the start of 2018, having to turn to outside co-mailing services and missed sales opportunities in the fourth quarter of 2019.
Arandell’s largest unsecured creditors include $174.8 million spread across two different pension liabilities. The company also received nearly $7.8 million as federal Paycheck Protection Program loan and owes Connecticut-based Horizon Paper Co. Inc. almost $5.2 million.
